Moody’s Rankings downgrades IndusInd Financial institution’s standalone credit score profile, adjustments outlook to damaging

World ranking company Moody’s on Friday downgraded IndusInd Financial institution’s baseline credit score evaluation to ba2 from ba1, citing considerations over insufficient administration oversight and uncertainty surrounding the financial institution’s medium-term technique following the resignation of senior management. The ranking company, nevertheless, affirmed the financial institution’s long-term rankings at ba1. It additionally revised the outlook to damaging from steady.“We have now modified the ranking outlook to damaging from steady to replicate the potential for additional impression within the financial institution’s solvency, funding, or liquidity, as IndusInd continues efforts to stabilise its operations and technique underneath a brand new administration staff,” Moody’s mentioned in a press launch.
Given the damaging outlook, an improve of IndusInd financial institution’s rankings is unlikely over subsequent 12-18 months, the company mentioned. Moody’s additionally mentioned that the downgrade of IndusInd’s standalone credit score power, or BCA displays weak spot in its inside controls as highlighted by the discrepancy in derivatives accounting. The company considers these points as governance dangers underneath its Environmental, Social and Governance (ESG) framework and has lowered the financial institution’s Governance Issuer Profile Rating to 4 from 3. It has additionally made a damaging company habits adjustment within the financial institution’s standalone evaluation.

Although the company affirmed the lender’s long-term international foreign money, native foreign money, financial institution deposits and issuer rankings. Moody’s mentioned that the affirmation of IndusInd’s Ba1 rankings considers the financial institution’s robust capital, core profitability and sufficient liquidity which is able to assist mitigate close to time period dangers to its funding and asset high quality. The Ba1 rankings additionally displays Moody’s assumption of reasonable degree of presidency assist for the financial institution, in occasions of want.

Final month, IndusInd’s Managing Director & CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned from their positions following the completion of the evaluate by the exterior company of the discrepancy in accounting for by-product transactions.

Whereas the exterior company’s estimate of the one-off loss was in keeping with the financial institution’s inside estimate as reported on 10 March 2025, the accounting lapse highlights insufficient inside controls, Moody’s mentioned.

“The resignation of the highest administration has additionally raised considerations on different potential lapses which can get uncovered over the following few quarters,” it mentioned.

IndusInd’s asset high quality is experiencing some stress with gross nonperforming loans ratio deteriorating to 2.3% on the finish of December 2024 from 1.9% on the finish of March 2024, attributable to a rise in dangerous loans within the microfinance and bank card mortgage section amid business vast challenges in subprime retail loans.

The financial institution can also be conducting an inside evaluate of its microfinance enterprise earlier than finalising the accounts for the quarter ending March 2025, in response to considerations raised to administration.

“Whereas we anticipate IndusInd’s NPLs to extend additional, the financial institution’s sufficient provisioning will restrict the impression on profitability and capital,” the ranking company mentioned.